I had a .net 1.1 app fail after installing .net 4.0, and I don't know if 4.0 is the cause. At the very end of 1.1's machine.config, the app was reporting an error unrecognized system.data section. (I ran it in vs2008 debugger to find this.) I commented out the section, it was empty anyway, and the app started to run again. The app has been running correctly for years, on xp, vista and win7-64.
This is the section in machine.config causing the problem:
<system.data>
<DbProviderFactories></DbProviderFactories>
</system.data>